Open-Ended Contracts - Short Notice Periods
The invoice and sales finance industry has launched a number of product enhancements to better meet customers' needs for open-ended contracts. Historically the industry was criticised for inflexible, long term contract periods that were not as flexible as traditional bank overdraft facilities which normally allow a business to move as and when they want (assuming you are one of the lucky ones that still has an overdraft).
We are pleased to say that a growing number of invoice finance companies are offering more open-ended and flexible contracts. It is also gratifying to note that the market research that we have conducted over the last few years has encouraged some of these providers to change their product offerings to better meet customers' requirements.
Spot Factors & Selective Invoice Factors
Over the last 4 to 5 years these types of providers have become much more high profile, offering a flexible alternative to the mainstream, whole turnover invoice finance providers who offer a day to day working capital solution. These “new” providers generally offer completely open-ended contracts, that you can simply dip in and out of (just like an overdraft) when you need working capital. Typically these offerings have:
- No minimum fee.
- No notice period.
- No requirement to use it every day, if you only use it once or quarterly, say for VAT purposes, that is fine too
Mainstream & Wholeturnover IF Providers
However, it is not just these niche players that are offering these more flexible terms, the mainstream, whole turnover style IF providers are also getting in on the act. One of the largest providers has been successfully offering a rolling monthly contract for the best part of 8 years i.e. requiring just 28 days' notice of termination. This has just been improved upon by an independent factor who now offers a 7-day notice of termination period, on all their products.
In addition, a number of “independent” providers are now offering very attractive terms for new clients including:
- An initial 6 month trial period – a new client can give just 1 month's notice within the initial 6 months of their contract (usually sufficient time for any company to work out if the service and the deal is working) and leave.
- An initial 6-month service guarantee period – a new client can give 1 month's notice, within this initial period, if they feel the service levels agreed upon at initial sign-up has not been met.
- 1 month and 3-month rolling contract options, offered by two further providers to small turnover businesses
To summarise, the industry has listened to its clients and has made positive changes to better meet their needs and move away from inflexible, long notice contracts.
If any of the above products are of interest then please contact us for more details.